Crystal ball gazing is invariably a perilous activity, especially in areas such as the economy, politics, and drug pricing reform, that are so prone to confounding factors. Despite this, it’s a useful exercise to predict, given what we know – historical precedent – and how we then expect the future to unfold.
In this post I’ll make some predictions on politics, the economy, and drug pricing reform, while a second post forecasts Covid-19 developments and public health.
Predictions on the economy and the 2022 midterms
The economy is experiencing an uneven recovery from the effects of the Covid-19 pandemic. Employment numbers have been robust for quite some time, and wages are increasing. But, inflation is stubbornly high, and labor and supply chain shortages threaten to hold back growth in certain sectors. And, while the stock market boom is consolation to some, there is a disconnect between what’s happening on Main versus Wall Street.
Moreover, globally there’s considerable uncertainty, exacerbated by a large set of unknowns. In fact, the biggest risks to the economy may come from geopolitical shocks: A Russian invasion of Ukraine, for example; China harassing Taiwan; tension on the Korean peninsula.
Ten months before the midterm election many pundits are predicting a Republican rout of Democrats in Congress. Well, this could very well happen. After all, President Biden’s approval ratings are poor. In addition, there are numerous vulnerable seats in Congress which Democrats will have trouble holding.
Nevertheless, 10 months are an eternity in politics. And the winds of fortune can change on a dime. Covid-19 could fade in 2022, the economy may continue to produce robust employment numbers, and inflation may diminish from its current peak. Moreover, enactment of the infrastructure bill and the possibility of passage of a slimmed down version of the budget reconciliation bill – or Build Back Better Act – could yield tangible results.
Indeed, I’ll go against the grain here and predict a sustained economic recovery with diminishing inflation (from its current peak), along with midterm election results in which Democrats maintain a slim majority in the House and a 50-50 Senate. The problem for Republicans may be that in lieu of offering constructive alternative plans on healthcare, childcare, education, infrastructure, climate change, and a host of other critical issues, they’re stuck opposing any government intervention on ideological grounds. For independents and swing voters pragmatism trumps ideology.
Drug pricing and reimbursement
For those expecting major changes in 2022 to pricing and reimbursement of pharmaceuticals landscape, they may be disappointed. The most consequential potential change to the drug pricing system – the overhaul of pharmacy benefit manager (PBM) rebates, with attendant 100% pass-through to beneficiaries – won’t happen. The Biden Administration has essentially nixed former President Trump’s executive order calling for a 100% pass-through of rebates. And, PBM rebate reform is not even stipulated in the budget reconciliation bill, or the Build Back Better Act.
Given that Senator Manchin (D-WV) has said “no” to the Build Back Better Act, the legislation’s prospects look dire. But, the bill isn’t dead yet. Senator Manchin may change his mind. He may in fact be using his “no” as a bargaining chip. A truncated budget reconciliation bill has a strong likelihood of passing.
Alternatively, popular pieces of the bill could be put forward, not in the form of budget reconciliation legislation, rather, as separate smaller bills that go through the regular process of law making.
These could include several of the drug pricing provisions as well as restructuring of the Medicare Part D (outpatient) benefit, as these are very popular among constituents. Moreover, there is strong support for certain measures, such as a $35 cap on monthly insulin out-of-pocket expenses, and a $2,000 maximum annual out-of-pocket costs for Medicare beneficiaries.
In Congress, there is also bipartisan support for shifting a substantial portion of cost management in the catastrophic phase of the Medicare Part D benefit to Part D plans rather than the federal government.
As a reminder, the prescription drug proposals included in the Build Back Better Act would allow the federal government to negotiate prices for a small number of high-cost drugs covered under Medicare Parts B and D, specifically drugs that no longer enjoy exclusivity and have no competition. Starting in 2025, 10 drugs would be selected, rising to 20 by 2028. The negotiation process would also apply to all insulin products.
The proposal establishes an upper limit for the negotiated price (the “maximum fair price”) equal to a percentage of the non-federal average manufacturer price; for example, 75% for small-molecule drugs more than 9 years but less than 12 years after FDA approval.
Notable exemptions include drugs that are less than 9 years (for small-molecule drugs) or 13 years (for biologics) from their FDA approval date, drugs with an orphan designation as their only FDA-approved indication, and “small biotechnology drugs” through 2027. These drugs are defined as accounting for 1% or less of Part D or Part B spending and account for 80% or more of the revenue of the small biotechnology manufacturer’s portfolio of approved drugs.
Even without legislation, the marketplace will continue to evolve in ways that put pressure on net drug prices. Payers in both the commercial and public spaces will increasingly resort to utilizing clinical- and cost-effectiveness to determine pricing and reimbursement of prescription drugs.
So, for example, state Medicaid policymakers have been actively pursuing ways to apply Institute for Clinical and Economic Review’s (ICER) research findings to help manage their prescription drug expenditures. The Kaiser Family Foundation found that at least 35 different states now review comparative effectiveness studies when determining their coverage criteria, with the most commonly cited studies published by ICER.
Also, biosimilars will gain even more traction across multiple therapeutic categories. Biosimilar uptake will steadily rise in 2022, and may accelerate further in 2023, for two reasons. First, more biosimilars are being approved – the most recent example being the insulin glargine biosimilar Rezvoglar in late December. Second, therapeutic interchangeability status will spur automatic pharmacy substitution.* The therapeutically interchangeable long-acting insulin product Semglee (which references insulin glargine) may offer lessons for future biosimilar launches, including biosimilars that reference Humira (adalimumab), which will be coming on board in 2023.
All in all, 2022 promises nothing earth-shattering politically or economically. On drug pricing and reimbursement, a combination of market-driven moves and legislative retooling of, among other things, insulin out-of-pocket costs, will lead to some modest changes.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
